The Value of a Happy Population for Relative Engagement in Vertical-Scaling and Horizontal-Scaling Entrepreneurship

We investigate the impact of a country’s population happiness level and happiness inequality on the level of entrepreneurship engagement pursued by individual entrepreneurs in that country. Entrepreneurship engagement broadly captures ambitions of entrepreneurs. It is measured along two dimensions: vertical-scaling entrepreneurship (newness-focused scale-up entrepreneurship) and horizontal-scaling entrepreneurship (expansion-focused scale-out entrepreneurship). Adopting the lens of supply and demand theory and occupational choice theory, we argue that a country’s happiness and happiness inequality levels are differently related to these two dimensions. We employ a sample of 71,964 early-stage (nascent or new) entrepreneurs from 79 countries, using the Global Entrepreneurship Monitor dataset. We construct new ordinal scales to measure individuals’ engagement levels in vertical-scaling and horizontal-scaling entrepreneurship. Country-level happiness and happiness inequality data are drawn from the Gallup World Poll (GWP) database. We estimate a pooled ordered logit model to explain individual engagement levels in vertical- and horizontal-scaling entrepreneurship. Explanatory variables include the two country-level happiness indicators plus a set of control variables. We find that country-level happiness significantly increases the likelihood of entrepreneurs within that country to pursue high-end entrepreneurship on the vertical-scaling dimension. At the same time, it decreases the likelihood that they will pursue high-end entrepreneurship on the horizontal-scaling dimension. On the contrary, country happiness inequality increases the likelihood of entrepreneurs’ pursuit of high-end entrepreneurship on the horizontal-scaling dimension while decreasing the likelihood of their pursuit of high-end entrepreneurship on the vertical-scaling dimension. In short, population happiness pushes entrepreneurs toward innovativeness but away from expansion, while happiness inequality does the opposite. This study contributes to the literature on psychological entrepreneurship by bringing the contextual influence of happiness into the dialog of entrepreneurship engagement. Our study also contributes to the high-quality entrepreneurship dialog by decoupling the growth perspective into two dimensions of entrepreneurship: vertical scaling and horizontal scaling.